IBISWorld explores the key issues impacting the fast-growing food-delivery sector

Online food delivery services have been a major innovation in the fast food and takeaway food industry.

However, as third-party delivery services continue to grow, everyone—from the third-party operators, to the partner stores, to consumers—face risks.

IBISWorld explores the third-party delivery wave.

The dawn of third-party delivery operators was met with great enthusiasm by investors.

READ: Foodora stops food delivery services in Australia

Menulog was acquired for $855 million by British delivery service Just Eat in May 2015.

The business model was simple. The company provided an online advertising and order platform for small stores that couldn’t afford one.

Menulog attracted consumers who were looking for somewhere they could compare multiple fast food options.

Stores and consumers flocked to the site, leading to very positive statements from Just Eat in March 2016 about the ability to get a positive return on its acquisition.

Then, in August 2016, Uber Eats launched in Melbourne and Sydney. By October, it spread to most areas of Australia.

IBISWorld senior industry analyst, Andrew Ledovskikh, said the difference in Uber Eats’ model was that it provided delivery.

“Menulog was limited by the fact it could only provide services to stores with existing delivery staff and services,” he said.

“By March 2018, Just Eat slashed the value of Menulog by 40 per cent. The company claimed this was a goodwill impairment to account for the cost of Menulog launching its own delivery service, rather than pressure from Uber Eats,” said Ledovskikh.

Concerns over remuneration and conditions for third-party delivery drivers has been strong over the past five years.

“This contractor status is vital to third-party operators, as it keeps costs down. It means these companies do not need to provide award wages, superannuation or benefits such as long service leave. Without the ability to employ these drivers as contractors, many third-party delivery operators would see their business model become unprofitable,”  said Ledovskikhn.

“This would see some operators collapse, while others would have to severely increase service charges to partner businesses,” he said.

IBISWorld forecasts the industry will face increased regulation on workers’ rights.

Many hospitality businesses jumped rapidly onto services liked Menulog and Uber Eats over the past five years, with Menulog having more than 10,000 partner stores in 2018.

IBISWorld explains the number is jumping every year.

But, while consumers are receiving the benefits of increased convenience through food-delivery services, they are increasingly paying higher prices for fast food and takeaway.

Additional delivery and the third-party commission fees built into the price of the food has meant strong growth in fast food prices paid by consumers, which in many cases is siphoned directly to third-party delivery operators.

“The pressure on third-party operators to ensure large investments pay off, and the possible increased costs to these operators if they lose regulatory battles surrounding contractor delivery drivers, will likely lead to consumers and small businesses facing higher charges over the next five years,” said Ledovskikh.

A February 2018 study by Finder.com.au, found that a third of all Australian adults living in capital cities were delivery-service users, and that their yearly average spend was already nearly $1,600.


Mindfulness is a key factor in people’s food choices for 2018

Mindfulness and individual choice are at the forefront of people’s minds when it comes to food choices in 2018.

Although these are not new trends, they are ongoing factors that continue to shape the consumer food market.

Consumers are developing a more holistic way of questioning what they eat.

Rather than random selection, they’re looking to connect with a brand’s values – be it health and wellness benefits, a social conscience, or enhanced nutrition.

READ: The top six food trends for 2018 – a manufacturer’s guide

Consumer packaged goods companies must become more innovative and relevant to meet consumer needs.

This pushes companies to run incubator programs for product innovation and experiment with creative technology in stores to keep consumers satisfied.

Studies conducted by Haines Consulting Group show that consumers are increasingly mindful in their food choices. It is the main driver to consumer behaviour in the food industry.

Modern consumers want to know what is in their food and how it was sourced, so they can make better decisions about their health and how the product impacts the environment and the community.

This behavioural shift means that brands must advertise and create an environment that empowers consumers through convenience, health and choice.

The technology and tools available to consumers mean they have more insight into their personal health than ever before.

Knowing how many steps they’ve taken, calories they’ve burnt, or how much sleep they’ve had, can play a big role in people’s food choices.

For brands, messaging is key, to help consumers make the desired choice for their health.

Consumers are becoming more educated on nutrition and food quality, as they want to make responsible food decisions.

Food is becoming less of a commodity and more of an individual choice.

Preferences need to be catered for and shopping needs to feel relevant and personal.

But, it’s a fine line to find the balance of enough options to overwhelming choice.

The ability to personalise is essential, but people don’t want to be confronted with too many choices.

Brands also need to effectively communicate food messages about nutrition and health.

Another trends that isn’t new, but is proving important to consumers, is fitting products into people’s busy lifestyles.

Products need to be conveniently packaged and marketed to tick the convenience box for consumers.

This trend is evident in the uptake and increase in food delivery services and meal packages, blurring the line between restaurants and supermarkets.

E-commerce is set for huge growth with fast ordering and delivery services, meaning shoppers can get everything they need quickly and easily.

Understanding all of these consumer trends can help business increase engagement and ultimately increase brand sales and success, Haines Consulting Group explains.